In recent years, non-fungible tokens (NFTs), cryptocurrencies, and other modern investment options have surged in popularity. However, physical commodities like gold remain highly sought after. In 2021, the global cryptocurrency market cap surpassed $2 trillion. Investors now face the question: Should they choose cryptocurrencies or gold?
Gold has been a store of value and medium of exchange for thousands of years and continues to thrive today. Even with the rise of decentralized digital currencies, gold retains its significance. Yet, owning physical gold can be challenging for individual investors due to high costs and storage concerns. PAX Gold (PAXG) aims to democratize gold ownership, allowing everyday investors to trade it like any other cryptocurrency.
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What Is PAX Gold?
Paxos Gold (PAXG) is a cryptocurrency backed by real gold reserves held by Paxos, a New York-based fintech company. Each PAXG token is pegged 1:1 to a troy ounce (t oz) of a London Good Delivery gold bar (400 oz) stored in Brinks Security vaults in London. These gold bars are certified by the London Bullion Market Association (LBMA), and PAXG tokens can be redeemed for physical bullion.
Benefits of PAX Gold:
- No storage or security hassles—eliminates the need for physical gold safekeeping.
- Fractional ownership—enables small-scale investments in gold.
- Liquidity—trade PAXG instantly on crypto exchanges.
Who Created PAX Gold?
PAX Gold was launched by Paxos Trust Company, a regulated blockchain and financial technology firm founded in 2012 by Charles Cascarilla and Richard Teo.
Key Projects by Paxos:
- PAX Dollar (USDP)—a USD-backed stablecoin.
- PAX Gold (PAXG)—gold-backed cryptocurrency.
The company has raised over $500 million from investors like PayPal Ventures and OakHC/FT.
How Does PAXG Work?
PAXG operates on the Ethereum blockchain (ERC-20 token), enabling:
- Seamless transfers between wallets, exchanges, and DeFi platforms.
- Direct redemption for LBMA-certified gold bullion.
- Low fees—only a 0.02% transaction fee (no custody costs).
Security Measures:
- Monthly audits by third-party firms to verify gold reserves.
- NYDFS-regulated—Paxos Trust complies with New York financial laws.
- Smart contract audits—regular checks for vulnerabilities.
Is PAXG Real Gold?
Yes. Each PAXG token represents actual gold bars with serial numbers matching physical bullion. Investors can:
- Check gold details via their Ethereum wallet address.
- Redeem tokens for fiat, crypto, or allocated/unallocated gold.
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PAXG vs. Gold ETFs: Key Differences
| Feature | PAX Gold (PAXG) | Gold ETFs |
|------------------|-------------------------------|-------------------------------|
| Ownership | Direct 1:1 gold backing | Tracks gold price (no ownership) |
| Liquidity | Instant crypto trading | Market hours only |
| Fees | 0.02% transaction fee | Management fees (~0.4%) |
| Redemption | Physical gold possible | Cash settlement only |
PAXG combines physical gold’s stability with crypto’s flexibility.
How Does PAX Gold Earn Money?
Revenue streams:
- Tokenization fee (1% for small purchases, lower for bulk).
- 0.02% transaction fee per trade.
Earning with PAXG:
- Staking: Lock tokens to earn interest (rates vary by platform).
- Lending: Provide liquidity to custodians for passive income.
How to Buy PAXG (Example: Coinbase)
- Download a self-custody wallet (e.g., Coinbase Wallet).
- Secure your recovery phrase.
- Buy ETH and transfer it to your wallet.
- Trade ETH for PAXG.
The Future of Asset-Backed Tokens
Asset-backed tokens digitize real-world assets (gold, real estate, oil), offering:
- Accessibility: Open markets to small investors.
- Transparency: Blockchain ensures auditability.
- Liquidity: Trade 24/7 without intermediaries.
Potential applications:
- Tokenized real estate.
- Commodity trading.
- Inflation hedging.
Outlook: Asset tokenization could revolutionize global finance by merging traditional value with blockchain efficiency.
FAQs
1. Can I redeem PAXG for physical gold?
Yes, PAXG holders can redeem tokens for LBMA-certified gold bars stored in London vaults.
2. Is PAXG a stablecoin?
No, PAXG’s value fluctuates with gold prices (unlike stablecoins pegged to fiat).
3. What’s the minimum PAXG purchase?
PAXG can be bought fractionally (e.g., 0.01 PAXG), making it affordable.
4. How is PAXG taxed?
Tax treatment varies by country—often as a commodity or capital asset.
5. Where can I stake PAXG?
Platforms like OKX and DeFi protocols offer staking options.
6. Is PAXG safer than physical gold?
It eliminates theft risks but depends on Paxos’ solvency and regulatory compliance.